If the PFI industry were hoping for a crumb of comfort in the Comprehensive Spending Review, it will be very disappointed. There is hardly any acknowledgment within the CSR documents that private finance has a role to play in our public services or infrastructure.
For a start, seven waste PFI schemes will now not be funded by PFI (including North London and South London), ostensibly because they are no longer needed to meet European Union landfill diversion targets. But I can’t help thinking that the Treasury may also have lost patience with PFI solutions, which have proved time-consuming and costly.
Chancellor George Osborne has also announced that he is taking away responsibility for the revenue costs of local government PFI to remove what he sees as perverse incentives to use PFI. What this probably means is that there will no longer be a specific allocation of PFI credits given to government departments. Instead it will be up to each department to allocate its own capital budget as it thinks fit and decide if and how much it puts aside for PFI.
What is clear is that the Treasury expects every pound to be spent to the maximum benefit, which means tests to demonstrate value for money will be strictly applied and policed.
On the positive side, the Spending Review re-confirmed that four PFI schemes in the transport sector will still be supported (including the extension to the Nottingham tram network). The Department for Environment, Food and Rural Affairs has also confirmed that 11 other waste projects currently in procurement will still go ahead and the current hospital PFI projects (such as the two schemes in Liverpool) appear to be safe.
PFI is hanging on by its fingertips – but for how long? At a time when hospital, road and school infrastructure needs to be modernised, it’s a travesty that the chancellor is putting yet another nail in the PFI coffin.
Tim Care is a partner in the public services practice at Dickinson Dees
